Theranos and the Authoritarian Personality

This week I am tackling Theranos and the story of Elizabeth Holmes, a “self-made billionaire” who took Silicon Valley by storm but whose fall from supposed grace was even more spectacular. In this podcast, I take apart what happened and how and then how this is just one of many such stories we see all the time. There are reasons for that and they aren’t all comfortable to know. Enjoy!

The Story of Theranos

Theranos is a combination of the words “therapy” and “diagnosis.” The basic concept of the company, founded by Elizabeth Holmes after she dropped out of Stanford in her sophomore year, is that drawing a tiny amount of blood at a time from each patient’s finger and avoiding the large syringes used by traditional labs will make patients less reluctant to get blood tests. The idea was that consumers would be less afraid, it would cost less and the number of tests that could be done on that drop or small vial of blood would offer the general public a lot more transparency and access to their medical reports and conditions.

She got the idea to do blood testing on a single drop of blood while she was attending Stanford’s School of Engineering in 2004. With the initial help of Channing Robertson, Stanford School of Engineering’s dean and her school adviser, she started Theranos in April 2004. Despite being told by actual engineers and medical professionals that her idea was impossible and simply could not be done, she pushed forward on her idea to create a small, simple looking machine no bigger than a printer that would run hundreds of tests on a single drop of a person’s blood. By December she had raised $6 million.

She had a very persuasive personality and was a natural salesperson, getting support from major financial and political players such as former secretaries of state George Shultz and Henry Kissinger as well as former secretary of defense William Perry, former head of the CDC William Foege and former Senate Republican majority leader Bill Frist, some of whom didn’t just financially back the venture but became board members. They were all sold on the promise of the technology but didn’t appear to be aware of the house of cards that tech was built on.

Until 2013, all of this was being done out of the public eye when Holmes leaped into the spotlight through major press exposure in Fortune magazine, Forbes, The New York Times and Inc. And not just public publicity, but inking multi-million dollar agreements with Walgreens, Cleveland Clinic, Carlos Slim Foundation, Capital BlueCross and AmeriHealth Caritas to use Theranos’ devices.

She modeled herself after Steve Jobs, not just in style but in appearance, wearing his signature black turtleneck sweater and even speaking in a deeper voice in public. And the similarities were not lost on the reporters who covered her story. They were more than happy to go along with her branding and dubbed her the “female Steve Jobs.”

Here’s how an October 2015 Inc Magazine article begins:

“You’d have to look really hard not to see Steve Jobs in Elizabeth Holmes. Both Holmes and Jobs were loners as kids. As a teenager, Jobs discovered Plato; Holmes favored Roman emperor-philosopher Marcus Aurelius. Both dropped out of college, in part, because they didn’t see the virtue in an education they believed wouldn’t make a difference in their futures. Like the Apple creator, Holmes has kept her company, Theranos — which seeks to radically disrupt the lab test industry — shrouded in secrecy. Jobs became a billionaire by the time he was 40. For Holmes, that moment came sooner, when Theranos was valued at $9 billion. She was not yet 31.”

Like Jobs, Holmes is also a vegan and a workaholic.

Also from that same article:

“Holmes is a vegan because avoiding animal products allows her to function on less sleep. She says she ‘doesn’t really hang out with anyone anymore,’ aside from her younger brother, who joined Theranos as a product manager four years ago. She didn’t take a vacation during the entire decade of her 20s and doesn’t date. ‘I literally designed my whole life for this,’ says Holmes in a strikingly baritone voice, her shoulders curled inward and hands clasped, the body language of someone who is fiercely protective and on guard. Talking to Holmes is a bit like talking to a politician — she’s politely impenetrable, unspooling a stream of words without actually revealing very much.”

In hindsight, it’s interesting reading the articles written about Holmes a few years ago and how they were all slanted to position her in a very positive, entrepreneurial light. She was going to be the Next Big Thing. The possibilites were endless!

Behind the scenes, things were not quite as positive.

Two-time Pulitzer Prize winning journalist John Carreyrou of the Wall Street Journal got a tip that something was very wrong with the blood testing device Theranos was working on, called the Edison after inventor Thomas Edison, and he began an investigation that resulted in a whole book called Bad Blood: Secrets and Lies in a Silicon Valley Startup.

And this is where things become super creepy and for those of you who have followed my work on Scientology and other destructive cults, some of this is going to sound eerily familiar.

Before Carreyrou had even finished his first article for The Journal, much less his book, Holmes turned to high-profile attorney David Boies, a man with an extremely controversial legal history who not only was Theranos’ lawyer but was also a board member. This is a man who doesn’t let moral quibbles get in the way of a good defense. For example, in November 2017 the HuffPost reported that Boies was fired by the New York Times after it was discovered that his law firm was hiring private investigators who were tasked with spying on and intimidating NY Times reporters who were working on the Harvey Weinstein story as well as intimidating Weinstein’s actual victims. From that story:

“The New Yorker’s Ronan Farrow reported Monday that lawyer David Boies, working on behalf of Weinstein, contracted with a team of private investigators, including former Mossad agents, to try to kill a negative New York Times story about Weinstein. Boies firm, Boies Schiller Flexner, has represented the newspaper three times in the last 10 years. The firm was reportedly defending the Times in a libel suit at the same time it was hiring private investigators to target its journalists.

“We never contemplated that the law firm would contract with an intelligence firm to conduct a secret spying operation aimed at our reporting and our reporters,” the Times said in a statement obtained by Politico’s Michael Calderone.

Boies claimed he knew nothing about these private investigators and what they were working on. Yet those claims fall a little flat when we also look at what happened with Theranos.

According to Carreyrou, Boies law firm directed PIs to surveil witnesses and journalists, weaponized non-discolosure agreements to enforce silence about company abuses of its employees and used other heavy-handed intimidation tactics. The fact that Boies himself was on the board of directors of Theranos and was using his law offices in New York to host promotional meetings for Theranos was a clear conflict of interest.

Carreyrou published the first article critical of Theranos and what was going on behind the scenes there in October 2015 including the shocking discovery that Theranos was using third-party machinery and not their own in-house devices to do the blood testing that made up most of Theranos’ income stream. They were making claims on their website that said one thing while doing something very different. And worse, the tech they were supposedly developing was not just a bit behind but had never actually gotten out of the starting gate.

According to an October 2016 article in Vanity Fair, Holmes called a staff meeing right after the Wall Street Journal article came out, a staff meeting that ended with all of the Theranos staff chanting in unison “Fuck you, Carreyrou!”

Just imagine that. An article critical of whatever company you work at is printed in the Wall Street Journal. Your CEO, Elizabeth Holmes, and her boyfriend who is also the company President, Ramesh Sunny Bulwani, come out and rile you up about how your company is changing the world and how the media are attacking you and getting it so wrong because that’s what the media does. They tell you that you are on the side of everything that is just and good and true. Of course this is exactly what you want to hear. You don’t want to lose your job. You don’t want to work for crooks. So you totally believe everything they tell you. And you see everyone else is nodding too. By the end of it, it’s more like a religious revival and than a staff meeting. Everyone is so worked up that they are chanting obscenities as a group towards the person blowing the whistle on their shenanigans. And you find yourself chanting right along with them. Does this sound at all familiar to any of you?

There is a culture in Silicon Valley which contributes to this kind of nonsense. In fact, I dare say it’s not a culture. It’s a cult. Here’s how Nick Boltin describes it in that Vanity Fair article:

“In Silicon Valley, every company has an origin story — a fable, often slightly embellished, that humanizes its mission for the purpose of winning over investors, the press, and, if it ever gets to that point, customers, too. These origin stories can provide a unique, and uniquely powerful, lubricant in the Valley. After all, while Silicon Valley is responsible for some truly astounding companies, its business dealings can also replicate one big confidence game in which entrepreneurs, venture capitalists, and the tech media pretend to vet one another while, in reality, functioning as cogs in a machine that is designed to not question anything — and buoy one another all along the way.

“It generally works like this: the venture capitalists (who are mostly white men) don’t really know what they’re doing with any certainty — it’s impossible, after all, to truly predict the next big thing — so they bet a little bit on every company that they can with the hope that one of them hits it big. The entrepreneurs (also mostly white men) often work on a lot of meaningless stuff, like using code to deliver frozen yogurt more expeditiously or apps that let you say “Yo!” (and only “Yo!”) to your friends. The entrepreneurs generally glorify their efforts by saying that their innovation could change the world, which tends to appease the venture capitalists, because they can also pretend they’re not there only to make money. And this also helps seduce the tech press (also largely comprised of white men), which is often ready to play a game of access in exchange for a few more page views of their story about the company that is trying to change the world by getting frozen yogurt to customers more expeditiously. The financial rewards speak for themselves. Silicon Valley, which is 50 square miles, has created more wealth than any place in human history. In the end, it isn’t in anyone’s interest to call bullshit.”

“When Elizabeth Holmes emerged on the tech scene, around 2003, she had a preternaturally good story. She was a woman. She was building a company that really aimed to change the world. And, as a then dark-haired 19-year-old first-year at Stanford University’s School of Chemical Engineering, she already comported herself in a distinctly Jobsian fashion. She adopted black turtlenecks, would boast of never taking a vacation, and would come to practice veganism. She quoted Jane Austen by heart and referred to a letter that she had written to her father when she was nine years old insisting, “What I really want out of life is to discover something new, something that mankind didn’t know was possible to do.” And it was this instinct, she said, coupled with a childhood fear of needles, that led her to come up with her revolutionary company.”

I have spoken at length on my channel about the hagiography of L. Ron Hubbard. That is a technical term for the life story of a religious figure. Is what I just read there from Vanity Fair any different from what L. Ron Hubbard said about his own life and how he came to his calling as a humanitarian, philosopher and educator? It’s the same con job we all respond to only in Silicon Valley it’s all about tech instead of spirituality. At least it is for now.

Not long after this public exposure began and that “Fuck You Carreyrou!” staff meeting, Sunny Bulwani was later found to be ordering company technicians to not use Edison machines at all when doing proficiency testing, which is required by FDA regulations to show that diagnostic machinery like the Edison are producing accurate results. After this was reported anonymously by a Theranos employee to New York’s public health lab and the New York State Department of Health in April 2014, Theranos then confirmed that the Edison was producing different results from the industry standard machines. Their lawyers then spun this to mean that the Edison was in a category all on its own and couldn’t be compared to traditional proficiency-testing methods.

There were also technical issues with being able to do such a wide array of tests on such a small sample of blood. If you’ve ever wondered why you have to give over a few vials of the stuff when you go get tested, it’s because that’s how much it takes to do all those tests. You can’t just dilute that blood and then factor in that you diluted it and get the same test results. By diluting blood, you literally change its chemical properties and this will definitely affect test results.

“Anytime you dilute a sample, you’re adulterating the sample and changing it in some fashion, and that introduces more potential for error,” says Timothy R. Hamill, vice chairman of the University of California, San Francisco’s department of laboratory medicine. Using dilution frequently is “poor laboratory practice.”

Also, getting blood from a pin prick, which is what the Theranos machinery is all about, can all by itself give you a bad time.

“Former employees say diluting blood drawn from fingers contributed to accuracy problems early last year with a test to measure potassium. Lab experts say finger-pricked blood samples can be less pure than those drawn from a vein because finger-pricked blood often mixes with fluids from tissue and cells that can interfere with tests.”

Holmes went on Mad Money the same day this article was published and wouldn’t give a straight answer to the simple questions she was asked. Instead, as part of her long diatribe she paraphrased Gandhi: “This is what happens when you work to change things, first they think you’re crazy, then they fight you, and then all of a sudden you change the world.”

Within a few months, real trouble started brewing. The New York Times reported in April 2016:

“Federal regulators have threatened a series of stiff sanctions against Theranos, the embattled blood-testing company, including closing down its flagship laboratory and potentially barring its chief executive from owning or operating its labs for two years.

“The sanctions, which have not been made final, were included in a strongly worded letter from officials from the Centers for Medicare and Medicaid Services. It is the latest blow to the credibility of Theranos and Elizabeth Holmes, its chief executive, who seemingly became a self-made billionaire by promising to upend the clinical testing industry.

“The government officials proposed a series of sanctions against the company, including the revocation of the company’s certification for its California laboratory, its primary operation, and suspension of its eligibility to receive payments under the Medicare insurance program.”

By July they followed through and banned Holmes from “owning, operating, or directing a blood-testing service for a period of two years.” Walgreens then ended its relationship and closed its blood collection centers. They were also ordered to cease use of one of their core devices, the Capillary Tube Nanotainer. Then the lawsuits began.

A Business Insider report from April 2017 stated:

“Anyone who paid to take one of Theranos’s blood tests in Arizona will be receiving a refund from the company… In total, Theranos will pay the state $4.65 million to refund the tests, and will also pay $225,000 to cover civil penalties and attorneys’ fees.

“Between 2013 and 2016, Theranos sold approximately 1.5 million blood tests to more than 175,000 Arizonans,” the attorney general said in a news release. “Each customer will now be reimbursed the full amount the customer paid for testing regardless of whether the results were voided or corrected.”

Other reported ongoing actions include civil and criminal investigations by the U.S. Securities and Exchange Commission and the U.S. Attorney’s Office for the Northern District of California, an unspecified FBI investigation, and two class action fraud lawsuits. Holmes denied any wrongdoing.

But on March 14, 2018, Holmes settled an SEC lawsuit. The charges of fraud included the company’s false claim that its technology was being used by the U.S. Department of Defense in combat situations and they also lied about a $100 million income in 2014 when in fact they only made $100,000. Holmes was also personally fined half a million dollars.

By September 2018, the company folded but not before Holems and Balwani were charged on nine counts of wire fraud and two counts of conspiracy to commit wire fraud. They could be sentenced to up to 20 years in prison if found guilty.

But what is she doing right now? She’s broke it off with Balwani in 2016 after firing him from the company but she wasn’t a free agent for long. She is now reportedly fiancé to hotel heir Billy Evans and hangs out in San Francisco as though she doesn’t have a care in the world. Just days before Theranos was dissolved, Daily Mail reported that Holmes was hanging out at Burning Man with Evans and his MIT signet rink around her neck. In other words, she is living the consequence-free life of the rich and famous.

She got away with everything and let’s be really clear: she is very likely never going to see a day in jail. She will buy her way out of that and perhaps end up with some hefty fines or the equivalent of rich people’s community service. Elizabeth Holmes lives in the rarefied air of the rich and famous and while I don’t make a practice of predicting stuff, I will say that in this case I’d be shocked if she gets more than slap on the wrist.

Now there’s all kinds of things that could be said, but I’m sure most of you won’t be surprised to hear what I found most fascinating about all of this. It’s the fact that Elizabeth Holmes acted a whole lot like a destructive cult leader throughout most of this, yet no one could really say with a straight face that Theranos was a destructive cult. Or could they?

Holmes and Steve Jobs

From that 2016 Vanity Fair article:

“Holmes had learned a lot from Jobs. Like Apple, Theranos was secretive, even internally. Just as Jobs had famously insisted at 1 Infinite Loop, 10 minutes away, that departments were generally siloed, Holmes largely forbade her employees from communicating with one another about what they were working on—a culture that resulted in a rare form of executive omniscience. At Theranos, Holmes was founder, C.E.O., and chairwoman. There wasn’t a decision—from the number of American flags framed in the company’s hallway (they are ubiquitous) to the compensation of each new hire—that didn’t cross her desk.

“And like Jobs, crucially, Holmes also paid indefatigable attention to her company’s story, its “narrative.” Theranos was not simply endeavoring to make a product that sold off the shelves and lined investors’ pockets; rather, it was attempting something far more poignant. In interviews, Holmes reiterated that Theranos’s proprietary technology could take a pinprick’s worth of blood, extracted from the tip of a finger, instead of intravenously, and test for hundreds of diseases—a remarkable innovation that was going to save millions of lives and, in a phrase she often repeated, ‘change the world.'”

…

“In hundreds of interviews with the media and on panels, Holmes honed her story to near perfection. She talked about how she didn’t play with Barbies as a child, and how her father, Christian Holmes IV, who worked in environmental technology for Enron before going on to work in a number of senior government jobs in Washington, was one of her idols. But her reverence for Steve Jobs was perhaps most glaring. Besides the turtlenecks, Holmes’s proprietary blood-analysis device, which she named “Edison” after Thomas Edison, resembled Jobs’s NeXT computer. She designed her Theranos office with Le Corbusier black leather chairs, a Jobs favorite. She also adhered to a strange diet of only green juices (cucumber, parsley, kale, spinach, romaine lettuce, and celery), to be drunk only at specific times of the day. Like Jobs, too, her company was her life. She rarely ever left the office, only going home to sleep. To celebrate her birthday, Holmes held a party at Theranos headquarters with her employees. (Her brother, Christian, also works at Theranos.)”

GQ Magazine wrote a review of Bad Blood in May 2018 and also found parallels with my thinking on this:

“[Holmes] was a classic narcissist — an intelligent and ambitious entrepreneur who surrounded herself with mediocre yes men. She pitted engineering teams against each other, assuming competition would foster better productivity over collaboration. She was also paranoid and secretive. Holmes’s assistants would Facebook-friend employees just to report on what they were posting. Her entire M.O. could be summed up by a motivational saying inscribed on a paperweight she kept on her desk: ‘What would you attempt to do if you knew you could not fail?'”

“Bad Blood argues that Holmes was less an impressive con artist, and something more akin to a cult leader. People — employees and investors alike — were taken by Holmes’s ‘aura.’ It’s no surprise that she deeply, deeply admired Steve Jobs. She dressed like him. Her Audi didn’t have a license plate, a nod to Jobs. After the Apple founder’s death, co-workers at Theranos noticed that Holmes was lifting management tactics from Walter Isaacson’s Jobs biography. (‘They were all reading the book too and could pinpoint which chapter she was on based on which period of Jobs’s career she was impersonating.’) If she wasn’t being investigated for ‘massive fraud,’ you’d imagine Holmes’s second startup would invent technology to let her wear Jobs’s skin.”

What if she had succeeded? Everything we just covered would still be just as true, yet would anyone care?

Steve Jobs was an authoritarian and is worshiped because people think he invented the Mac and the iPod. He didn’t. He just marketed them. But Elizabeth Holmes ran her company in lock step with what Jobs did at Apple. Do you think she’s the only one doing that?

Jeff Bezos is an authoritarian yet is worshipped because of his financial status.

Tom Cruise is adored and worshiped by millions yet he’s a monster.

Our obsession or at least complicitness with success drives an end-justifies-the-means mentality. It is us who enables these people. We are the followers and they are the leaders. We empower them. Without us, they are nothing.

There is a personality type there. A type that lies as easily as it breathes. That uses people like puppets so long as they willingly dance to their tune, but is just as happy to watch them burn on a bonfire once they won’t. That promises the sun, the moon and the stars to anyone who will support them, but will visit the wrath of hell on anyone who oppposes them. It’s not just about being vindictive or abusive. It’s a much more complete package.

It’s developing a persona of trust, of affability even. Just don’t try to get too close or those friendly eyes might just turn dark and stormy and you may find yourself suddenly at the receiving end of an unexpectedly brutal personal remark. Of course, if they need you for something, the smiles will come back and the apologies will sound so sincere and you’d swear you were just imagining the severity of what just happened. There’s no way this kind soul ever meant to say those things. It was just stress.

It’s carrying oneself with authority and passion and a sense of purpose that is striking in its simplicity and its directness. Here is someone who knows what they want. Who has a clear idea of how to get it and isn’t afraid to push people around in service to a greater cause.

It’s knowing that everything they do is not just for the greater good, but is for your good. You, personally. They want YOU to succeed. They want YOU to live longer or be better or worry less. Whatever it is that you want, they seem to want that same thing too. And once you accept that, you’ll not just be okay with them pushing you around but you’ll want them to. You know that’s the kind of thing you need to be the better person you want to be but somehow can’t make yourself accomplish.

It’s the kind of person you start thinking you should be. The kind of person who is better than you in some crucial way but who doesn’t lord it over you because they seem to say, at least at the beginning, that you can be just like them too.

That is the personality type of the cult leader. It’s got nothing to do with religion or wealth-making or company building or entertaining. To this type of person, that’s just window dressing. It doesn’t much matter what they are doing so long as they are dominating other people and doing it in such a way that those people never suspect they are being dominated. That is what a cult leader is.

That is Jeff Bezos. That is Tom Cruise. That was Steve Jobs and that was Elizabeth Holmes. So long as they aren’t abusing us, we are happy to have them around because they provide us with trinkets and little conveniences or distractions which make our lives a little less stressful or a little less worrying or a little funnier. I think there are probably a bunch of lessons to be learned here but I don’t think I need to spell them out. I hope you’ll give what I said here today some thought and maybe the next time the Next Big Thing comes around, maybe we can be a little more critical about what that thing is and who it is that is offering it to us. They might just not be what you think they are.

Thank you for watching. I want to end with this little reminder: It’s chaos. Be kind.

Sources:

Wall Street Journal – Theranos has Struggled with Blood Tests

How Playing the Long Game Made Elizabeth Holmes a Billionaire

Department of Health and Human Services FDA inspection report of 9/16/2015

Exclusive: How Elizabeth Holmes’s House of Cards Came Tumbling Down

Bad Blood Review: The Biggest Scam in Silicon Valley

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